181
Views
4
CrossRef citations to date
0
Altmetric
ORIGINAL ARTICLES

Optimal design of equity-linked products with a probabilistic constraint

&
Pages 253-280 | Published online: 12 Nov 2009

References

  • Arrow , K. J. 1974 . Optimal insurance and generalized deductibles . Scandinavian Actuarial Journal , 1 : 1 – 42 .
  • Barrieu , P. and El Karouri , N. 2002 . Optimal design of derivatives in illiquid markets . Quantitative Finance , 2 : 181 – 188 .
  • Basak , S. 1996 . A general equilibrium model of portfolio insurance . Review of Financial Studies , 8 : 1059 – 1090 .
  • Basak , S. , Pavlova , A. and Shapiro , A. 2006 . Risk management with benchmarking . Management Science , 52 : 542 – 557 .
  • Basak , S. and Shapiro , A. 2001 . Value-at-risk-based risk management: optimal polices and asset prices . Review of Financial Studies , 14 : 371 – 405 .
  • Basak , S. and Shapiro , A. 2005 . Model of credit risk, optimal policies and asset prices . Journal of Business , 78 ( 4 ) : 1215 – 1266 .
  • Bermin , H. P. 2002 . A general approach to hedging options: applications to barrier and partial barrier options . Mathematical Finance , 12 : 199 – 218 .
  • Bernard , C. , Boyle , P. & Tian , W. 2008 . Optimal design of structured products and the role of capital protection . Working Paper, University of Waterloo .
  • Biffis , E. and Millossovich , P. 2006 . The fair value of guaranteed annuity options . Scandinavian Actuarial Journal , 1 : 23 – 41 .
  • Black , F. and Perold , A. 1992 . Theory of constant proportion portfolio insurances . Journal of Economics Dynamics and Control , 16 : 403 – 426 .
  • Boyle , P. and Imai , J. 2001 . Dynamic fund protection . North American Actuarial Journal , 4 : 28 – 41 .
  • Boyle , P. and Schwartz , E. S. 1977 . Equilibrium prices of guarantees under equity-linked contracts . The Journal of Risk and Insurance XLIV , 4 : 639 – 660 .
  • Boyle , P. and Tian , W. 2007 . Portfolio management with constraints . Mathematical Finance , 17 ( 3 ) : 319 – 343 .
  • Boyle , P. & Tian , W. ( 2008 ). The design of equity linked contracts . Insurance: Mathematics and Economics (in press) .
  • Brennan , M. 1993 . Aspects of insurance, intermediation and finance . The Geneva Papers on Risk and Insurance Theory , 18 ( 1 ) : 7 – 30 .
  • Brennan , M. and Schwartz , E. S. 1976 . The pricing of equity-linked life insurance with an asset value guarantee . Journal of Financial Economics , 3 : 195 – 214 .
  • Brennan , M. and Schwartz , E. S. 1988 . Time-invariant portfolio insurance strategies . Journal of Finance , 43 : 283 – 299 .
  • Brennan , M. , Schwartz , E. S. and Lagnado , R. 1997 . Tactical asset allocation . Journal of Economics Dynamics and Control , 21 : 1377 – 1403 .
  • Brennan , M. and Solanki , R. 1981 . Optimal portfolio insurance . Journal of Financial and Quantitative Analysis , 16 : 279 – 300 .
  • Brenninga , S. and Blume , M. 1985 . On the optimality of portfolio insurance . Journal of Finance , 40 : 1341 – 1352 .
  • Campbell , R. , Huisman , R. and Kpedijk , K. 2001 . Optimal portfolio selection in a value at risk framework . Journal of Banking and Finance , 25 : 1789 – 1894 .
  • Cont , R. and Tankov , P. 2004 . Financial modelling with jump processes , London : Taylor & Francis Group .
  • Cont , R. & Tankov , P. 2008 Constant proportional portfolio insurance in presence of jumps in asset prices . Mathematical Finance (in press) .
  • Cox , J. C. and Huang , C. F. 1989 . Optimal consumption and portfolio policies when asset prices follow a diffusion process . Journal of Economic Theory , 49 : 33 – 83 .
  • Cvitanić , J. and Karatzas , I. 1992 . Convex duality in constrained portfolio optimization . Annals of Applied Probability , 2 ( 4 ) : 767 – 818 .
  • Detemple , J. B. , Garcia , R. and Rindisbacher , M. 2003 . A Monte-Carlo method for optimal portfolios . Journal of Finance , 58 : 401 – 446 .
  • Detemple , J. B. and Murthy , S. 1997 . Equilibrium asset prices and no arbitrage constraints . Review of Financial Studies , 10 ( 4 ) : 1133 – 1174 .
  • Doherty , N. A. and Schlesinger , H. 1983 . Optimal insurance in incomplete markets . Journal of Political Economy , 91 : 1045 – 1054 .
  • Dybvig , P. , Rogers , L. C. and Back , K. 1999 . Portfolio turnpikes . Review of Financial Studies , 12 : 165 – 195 .
  • El Karoui , N. , Jeanblanc , M. and Lacoste , V. 2005 . Optimal portfolio management with American capital guarantee . Journal of Economic Dynamic & Control , 29 : 449 – 468 .
  • Gabih , A. , Grecksch , W. and Wunderlich , R. 2005 . Dynamic portfolio optimization with bounded shortfall risks . Stochastic Analysis and Applications , 3 : 579 – 594 .
  • Grossman , S. and Zhou , Z. 1996 . Equilibrium analysis of portfolio insurance . Journal of Finance , 51 : 1379 – 1403 .
  • Hardy , M. 2003 . Investment guarantees: modeling and risk management for equity-linked life insurance , Hoboken, New Jersey : Wiley .
  • Harrison , J. M. and Kreps , D. 1979 . Martingales and arbitrage in multiplied securities market . Journal of Economic Theory , 20 : 381 – 408 .
  • Harrison , J. M. and Pliska , S. 1981 . Martingales and stochastic integrals in the theory of continuous trading . Stochastic Analysis and Applications , 11 : 215 – 260 .
  • Haugh , M. B. and Lo , A. 2001 . Asset allocation and derivatives . Quantitative Finance , 1 : 45 – 72 .
  • Henderson , B. & Pearson , N. 2007 . Patterns in the payoffs of structured equity derivatives . Working Paper, AFA 2008 New Orleans Meetings .
  • Inada , K. 1963 . On a two-section model of economic growth: comments and a generalization . Review of Economics Studies , 30 ( 2 ) : 119 – 127 .
  • Jorion , P. 2003 Portfolio optimization with constraints on tracking error . Financial Analyst Journal , September , 70 – 82 .
  • Kallsen , J. 2000 . Optimal portfolios for exponential lévy processes . Mathematical Methods of Operations Research , 51 : 357 – 374 .
  • Karatzas , I. & Shreve , S. E. 1999 . Mathematical model of finance . Applications of mathematics Vol. 39 . New York, Heidelberg & Berlin : Springer-Verlag .
  • Kat , H. 1998 . Structured equity derivatives – the definite guide to exotic options & structured notes , New York : Wiley .
  • Kostadinova , R. 2007 . Optimal investment for insurers when the stock price follows an exponential Lévy process . Insurance: Mathematics and Economics , 41 ( 2 ) : 250 – 263 .
  • Kramkov , D. and Schachermayer , W. 1999 . A condition on the asymptotic elasticity of utility functions and optimal investment in incomplete markets . Annals of Applied Probability , 9 : 904 – 950 .
  • Leland , H. E. 1980 . Who should buy portfolio insurance? . Journal of Finance , 35 : 581 – 594 .
  • Merton , R. 1971 . Optimum consumption and portfolio rules in a continuous-time model . Journal of Economic Theory , 3 : 373 – 413 .
  • Nielsen , J. and Sandamann , K. 1995 . Equity-linked lite and insurance: a model with stochastic interest rates . Insurance: Mathematics and Economics , 16 : 228 – 243 .
  • Nelsen , R. B. 1998 . An introduction to copulas , New York : Springer-Verlag .
  • Pliska , S. 1986 . A stochastic calculus model of continuous trading: optimal portfolios . Mathematical Methods of Operations Research , 11 : 371 – 384 .
  • Raviv , A. 1979 . The design of an optimal insurance policy . American Economic Review , 69 : 84 – 96 .
  • Spivak , G. and Cvitanić , J. 1999 . Maximizing the probability of perfect hedge . Annals of Applied Probability , 9 ( 4 ) : 1303 – 1328 .
  • Susanne , E. and Klüppelberg , C. 2004 . Optimal portfolio when stock prices follow an exponential Lévy process . Finance and Stochastics , 8 ( 1 ) : 17 – 44 .
  • Tepla , M. 2001 . Optimal investment with minimum performance constraint . Journal of Economic Dynamic & Control , 25 : 1629 – 1645 .
  • Tiong , S. 2000 . Valuing equity indexed annuities . North American Actuarial Journal , 4 ( 4 ) : 149 – 163 .
  • Uzawa , H. 1961 . On a two-sector model of economic growth . Review of Economic Studies , 29 ( 1 ) : 40 – 47 .
  • Uzawa , H. 1963 . On a two-sector model of economic growth II . Review of Economic Studies , 30 ( 2 ) : 105 – 118 .
  • Vanduffel , S. , Chernih , A. & Maj , M. 2008 . A note on the suboptimality of path dependent pay-offs in Lévy markets . Working Paper, Katholieke Universiteit Leuven

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.